Jefferies sets Rheinmetall stock Buy rating, €1,540 target

On Thursday, Rheinmetall (ETR:RHMG) AG shares received a Buy rating from Jefferies, with a price target set at €1,540. The defense sector is experiencing a period of growth, and Rheinmetall is positioned to capitalize on this trend, according to the research firm. The German company is expected to benefit from increased defense budgets, particularly in Germany and Italy, where government spending on defense is anticipated to rise significantly starting in 2025.

Jefferies highlighted Rheinmetall’s joint venture with Leonardo as a key factor in its potential success. This partnership is seen as a strategic move that will allow Rheinmetall to gain from Italy’s defense budget, which is projected to be one of the fastest-growing in Europe by 2028-2030. The firm’s analysis suggests that the current upward trend in defense spending will mirror the situation from 2022 to 2024, where Rheinmetall’s revenue outperformed early expectations by more than 30% after adjusting for mergers and acquisitions.

The research firm’s optimistic outlook is further supported by the anticipation of a swift increase in momentum for Rheinmetall, aligning with the defense budgets’ growth. Jefferies’ forecasts for the company’s performance in 2027 are approximately 30% higher than the consensus, indicating a strong conviction in Rheinmetall’s market position and future revenue.

Rheinmetall’s stock is set to benefit from the current geopolitical climate, which is prompting countries to invest more in their defense capabilities. Germany was noted as the first nation to announce substantial increases to its defense budget, which will commence in 2025. This move is expected to set a precedent for other European countries to follow suit, creating a favorable environment for defense contractors like Rheinmetall.

The company’s growth prospects are not solely reliant on European defense budgets. Rheinmetall’s diversified operations and strategic partnerships position it to take advantage of the broader global increase in defense expenditures. As nations worldwide focus on enhancing their military capabilities, Rheinmetall is poised to meet the rising demand for defense products and services.

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